Yubi – Securitisation

YubiPool - Our One-stop solution for all your securitisation needs

Benefits of Securitisation

Securitisation offers several benefits to the seller, investor, and debt markets such as –

For the seller or originator, securitisation mainly improves liquidity. It removes the assets from the originator’s balance sheet, thus liberating capital for other uses and enabling restructuring of the balance sheet.

For the investor, securitisation essentially provides an avenue for a relatively risk-free investment. It provides an opportunity to investors to acquire good quality assets and diversify their portfolios.

For the debt market, securitisation increases the number of securitised debt instruments and provides additional liquidity. Securitisation also widens the market by facilitating unbundling, better allocation, and managing project risks by attracting new players.

Benefits of securitisation in a nutshell are:

  • Helps banks reduce the need for additional capital by keeping loans off their balance sheet.
  • Securitisation is an alternative form to banks/financial institutions of funding risk transfer and capital market development.
  • It helps improve liquidity by reducing lending concentration.
  • Funds can be attained at lower costs due to their isolation from the potential bankruptcy risk of the originator.
  • Provides better match of assets and liabilities and development of long-term debt market
  • Helps in providing a diversified pool of uniform assets to banks and financial institutions
  • Helps in converting non-liquid loans or assets into liquid assets or marketable securities.
  • Securitisation helps transfer funds from a less efficient debt market to a more efficient capital market.

How Securitization Works?

The process of securitisation works in the following manner:

  • The lender sells several types of loans to borrowers.
  • The lender packs certain loans together and sells these to the Asset Reconstruction Company (ARC).
  • The Asset Reconstruction Company, in turn, makes payment to the original lender for the loans purchased.
  • These loans are then converted into a pool of securities by the Asset Reconstruction Company for issuing Pass-Through Certificates or Pay Through Certificates (PTC).
  • In Pass-through certificates, the cash is collected by the original lender, then passed on to the Special Purpose Vehicle (SPV).
  • For Pay through certificates, usually, the cash is collected by the Special Purpose Vehicle (SPV) from the borrower and then distributed to the certificate holders. These Pay Through Certificates-PTCs are further sold to individual investors.
  • In the case of Pass-Through Certificates, the recoveries from the original borrower are obtained by the original lender, and in the case of Pay-Through Certificates by Asset Reconstruction Company.
  • If the original borrower makes the collection, he is under obligation to pass on the money to Asset Reconstruction Company (ARC), which in turn passes on these amounts to the investors.

Why is Securitisation for you?

Securitisation is an essential function of the modern financial system, and a securitisation platform makes it simpler for you to carry out the transactions. YubiPool– the securitisation platform of Yubi is a one-stop solution for all your securitisation needs. YubiPool is transforming the Asset-Backed Securitisation (ABS) market and bringing unparalleled efficiencies and a data-driven approach to ABS deal-making. YubiPool‘s comprehensive product capabilities serve varying needs throughout the Securitisation & Direct Assignment (DA) lifecycle.

For Originators:

Securitising helps to reduce debt from the balance sheet and helps to provide additional liquidity, which can be used to make new loans. YubiPool provides an easily executed Price discovery vs. Loan product model with compliance modules for pre-and post-settlement requirements. You can also discover better pricing with a simpler process to enhance your experience.

For Investors:

ABS or Asset-Backed Securities present an opportunity to invest in asset securitisation classes otherwise not accessible in the markets that offer an attractive risk/return profile. YubiPool provides a comprehensive asset quality check and sanctity check of data leading to a reduced load on the investors.

FAQs

What types of assets can be securitised?

Basically, all assets which generate cash flow can be securitised, e.g., mortgage loans, housing loans, automobile loans, credit card receivables, trade receivables, consumer loans, lease finance, etc. A perfectly healthy and normal financial asset usually is securitised.

 

What is an Asset Reconstruction Company?

Asset Reconstruction Company (ARC) means a company registered with RBI to carry on the business of securitisation and reconstruction of financial assets or both.

 

What are the advantages of securitisation?

The advantages of securitisation are:

  • Improves liquidity by turning illiquid assets into liquid ones
  • Frees up capital for the originator
  • Provides income for investors
  • Allows small investors to play

 

What is an example of securitisation?

Mortgage-backed security (MBS) is an excellent example of securitisation. Combining mortgages into one extensive portfolio, the issuer can divide the pool into small pieces and then sell to investors, each packaged as a type of bond.